Welcome to this week’s edition of top stock market highlights.
US Federal Reserve
The US Federal Reserve has thus far been relentless in its quest to bring inflation down to its targeted 2% level.
On Wednesday, the central bank raised its benchmark rate once again, this time by 0.5 percentage points (50 basis points or bps).
As a result, the benchmark rate rose to between 4.25% and 4.5%, its highest level since 2007.
The latest hike is a step down from its previous four consecutive 75 bps increases.
Meanwhile, officials also indicated that interest rates are expected to stay elevated next year, with possibly no reductions until 2024 rolls by.
The “terminal rate”, defined as the maximum interest rate where the central bank will stop raising rates, was pegged at 5.1% based on a summary of individual member expectations.
This water mark indicates that officials still have some way to go by way of rate hikes that should continue into 2023.
In the longer term, analysts believe that the rate will go down to 4.1% in 2024 before ending 2025 at 3.1%.
Should all go way in the inflation fight, long-term rates should settle at around the 2.5% level.
As a homeowner in Singapore, the rise in interest rates will flow through to higher mortgage rates.
Hence, homeowners may wish to lock in their mortgage rates for a fixed period rather than select a floating rate that may steadily rise in tandem with the US benchmark rate.
Singapore’s GDP and inflation
Professional forecasters have weighed in on Singapore’s gross domestic product (GDP) for 2022.
The GDP for this year is expected to come in at 3.6% year on year, slightly higher than the previous estimate of 3.5%.
For 2023, GDP is projected to increase by 1.8%, down from the previous estimate of 2.8% in a survey conducted in September.
These forecasts seem to imply that Singapore’s economy will not tip into a recession next year, contrary to what Prime Minister Lee Hsien Loong had warned in May this year.
Inflation, however, should remain elevated.
Meanwhile, the median forecast for all-in inflation and core inflation for 2022 stands at 6.1% and 4.1%, respectively.
For 2023, all-in inflation is projected to be at 5.2% while core inflation should remain fairly high at 4%.
These forecasts incorporate the effects of the impending 1% rise in the GST rate which will take place on 1 January 2023.
To counteract the effects of inflation, you can consider investing in a variety of REITs and blue-chip stocks that not only pay out steady dividends but also offer long-term growth.
Grab Holdings (NASDAQ: GRAB)
Grab, like many growth stocks, has been under pressure as interest rate soar and investors’ risk appetite wane.
The largest ride-hailing and food delivery in South-East Asia has announced a series of cost-cutting measures aimed at conserving cash.
The measures include freezing hiring, having no salary increments for senior managers and reducing the budgets for travel and other expenses.
These initiatives were released in a memo sent by CEO Anthony Tan, who prepared his staff for a leaner and fitter organisation as it pivots towards “sustainable and profitable growth”.
Revenue for the company’s fiscal 2022’s third quarter surged by 143% year on year to US$382 million, with a doubling of ride-hailing revenue and a 250% year on year jump in delivery revenue.
Gross merchandise value climbed 26% year on year for the quarter.
Grab narrowed its net loss to US$327 million, a significant improvement from the net loss of US$970 million in the same period last year.
Revenue guidance for the full year was lifted to a range of between US$1.32 billion to US$1.35 billion, up from the previous range of between US$1.25 billion to US$1.3 billion.
Shares of the ride-hailing giant were down 55.7% year to date to close at US$3.20.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
